Selection of stocks for investment | Selection of companies


I have already written how to select stocks for active intraday trading. But if you are seriously dealing with the issue of capital accumulation, then active trading (trading) alone is not enough. Your activity needs to be diluted with investment positions. Ultimately, it is long-term positions that bring the long-coveted passive income. I plan to devote a separate article to the topic of combining trading with investment activities, but for now, let’s get down to business …

Requirements for companies

The first thing to realize is an investment idea in the stock market has been disclosed for 3 years… Yes, capital in business is not so agile. Any experienced investor will attest to this fact. Of course, it also happens that the real period of holding a position is shorter, but at the time of investing in stocks, you need to think far (with a margin). Business doesn’t think for short periods. For example, in Japan, the culture of doing business implies a development plan for 300 years ahead. And you probably know that the founders and top managers of any successful company today are notable for their vision. By investing money in a company, you actually join its idea, its plans and its vision. Or not? Then why did you buy shares in this company? Okay … let’s formulate the first requirement:

The company’s business must remain competitive and in demand for at least the next 20 years.

In order not to leave a question about the assessment competitiveness business open, just imagine how easy it is for a company to expand its customer base, and how difficult it is for a client to refuse the services of this company in favor of another. You will see the rest in the reports.

What to look for in the report

Such is the sharp transition to reading quarterly reports. But there is nothing to worry about. There are 4 main numbers, operating with which you can give a fairly deep description of any company or individual.

  1. Income
  2. Costs
  3. Assets
  4. Commitments

I will not describe the details, but this does not mean that I do not understand how hard it can be to get money and how easily it can be lost. It’s just that I didn’t bother with the question of high-quality selection of profitable companies and put together a full-fledged instruction. If you need this instruction, here it is 👇. Now I will describe in general terms in order to deduce a few more requirements for companies. The cost of a business consists of only two parts: net assets and net income. “Clean”, i.e. minus Obligations and Expenses (you will need those 4 numbers). It is logical to form the second requirement here:

The company’s revenues should grow, and some of them should be used to acquire new property and expand the business

Buy cheap …

The shares of many companies with really good financial performance, as a rule, are not cheap anymore. And it is not surprising, since there is always a demand for a good product. But is it worth running into the train at full speed? And for some reason, everyone understands that it is necessary to wait for a train to stop, but only a few are waiting for a stop in price growth and their correction in stocks. – What if they leave without me ?! I sincerely do not understand such people. Do you think that everything the company was created for will happen today? No. Of course you don’t think so. I just want to make quick money)) And who doesn’t want to? But investing and trading is not about “fast”. The winner is not the one who is faster, but the one who is longer

If you liked the company – expect a good price.

– What if the price fell for a reason ?! Of course not just like that))

What about news?

Of course, you can build the most incredible hypotheses on the fact of the publication of this or that news about the company or the market as a whole. But is it worth the effort if these events pale in comparison to the scale of the entire business?

Bad news for a good business is more of an opportunity to buy this business for less than a signal to sell.… Most investors react to news instantly, forgetting why they were joining the company’s business. In addition, analysts are doing their job by driving fear into stockholders. It is worth understanding one simple truth – the same company will ALWAYS have both good and bad news. And stock prices will ALWAYS swing up and down… But if you own shares in a competitive company with constantly growing revenues and expanding business, in 10, 20 or even 30 years it will not disappoint you.

Services for the selection of shares

Here you will need resources in three directions:

  1. filtering by criteria
  2. base of reports
  3. news feed

As a rule, modern services solve problems in all directions at once, but sometimes it is more convenient to do something in one place, and something in another. So it works for me. Therefore, I will throw off several services at once, and what and where is more convenient to do, decide for yourself. https://finviz.com – this site is found in the stock selection instructions I mentioned above 👆. The free functionality of the resource is enough to get general information about the stock market at the moment, compare companies by a huge number of indicators, as well as get comprehensive information on the company’s business and its news. https://finance.yahoo.com is a good and detailed resource with almost the same free functionality as the previous one, but filtering companies (in my opinion) is worse. But what is remarkable is the ability to manage your portfolios within the platform. There is even an opportunity to connect your broker and pull up positions in the report. https://www.macrotrends.net is a completely free site that provides data on company reports in numerical and graphical form for a long period of time. This service is also often featured in the Guide provided by me. There is also a filtering of companies by key indicators, but it is clearly inferior to Finviz.

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